Oral Contracts – What are my rights if my contract is not in writing?

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Oral Contracts – What are my rights if my contract is not in writing?

Aug 30, 2021

Under California law, “[a]ll contracts may be oral, except such as are specially required by statute to be in writing.” Cal. Civ. Code § 1622. We’ll get to the specifics on those requirements later in this article, but let’s first consider a scenario in the entertainment industry where it is more common than not to have an oral contract.

Picture this: you have a brilliant idea for a movie you want to direct and think to yourself, “I know the perfect person to write the script!” You ask your friend to lunch and float the idea and you’re in luck – he’s on board. Over the course of lunch, you hatch a plan to collaborate on the project, discussing a timeline to get a treatment written and pitched to studios. You talk about how you plan to split ownership and proceeds from the project and how you plan to pay for developing the project. You verbally agree to work together exclusively for the next two years to get the project developed and sold.

At the end of lunch, you bump elbows with your writer friend, excited that the project is moving forward and eager to get started on the work. But then, you start hearing less and less from your friend. No worries, he’s busy getting that treatment written. Except, it’s getting close to when you’d agreed to start pitching, and your friend won’t even return your calls. And then, disaster strikes! You hear through the grapevine that your friend finished the treatment and pitched it himself without you, keeping ownership and payment for the project all to himself, cutting you out of the deal entirely. You are, understandably, hurt and angry. You want to sue! That was your project, together. But wait, you realize that you never put your agreement in writing. You were so excited about that lunch conversation and you trusted your friend, so you just never got around to it. Now what? Can you sue? Do you have any rights at all? Or are you just plain out of luck?

The elements of an enforceable oral contract are (1) a manifestation of an intent to be bound by the terms of the agreement, (2) sufficiently definite terms, and (3) an agreement supported by adequate consideration. Entertainment Law 3d § 9:17.

Let’s break these three parts down.

Manifestation of an intent to be bound by the terms of the agreement

The first step in determining whether there is an enforceable oral agreement is looking to the surrounding circumstances and seeing if a reasonable person would infer from the parties’ words and conduct that they meant to enter into an oral contract. The intention of parties to be bound by an oral contract is determined by their words, acts, and conduct and by the pertinent circumstances. See H. S. Crocker Co. v. McFaddin, 148 Cal. App. 2d 639 (1957). “The law imputes to a person the intention corresponding to the reasonable meaning of his or her words and acts.” Platt v. Union Packing Co., 32 Cal. App. 2d 329, 336 (1939).

Sufficiently definite terms

The second step is to look at the words used when reaching the agreement; is it readily apparent what was agreed to? “[W]hether oral or written, there must be certainty and definiteness as to the language or words used in expressing the terms of the contract and in showing a meeting of the minds of the parties as to the terms.” Nevills v. Moore Min. Co., 135 Cal. 561, 563 (1902). Also, can you tell what would constitute a breach from the conversation in which the agreement was reached? If so, the terms are likely sufficiently definite. “The terms of a contract are reasonably certain if they provide a basis for determining . . . the existence of a breach and for giving an appropriate remedy.” 1 Witkin, Summary of Cal. Law (9th ed., 1987) Contracts, § 145; Restatement 2d Contracts § 33. “It is not necessary that each term be spelled out in minute detail, only that the essentials of the contract be agreed on and ascertainable.” Domino v. Mobly, 144 Cal.App.2d 24, 28 (1956); see also Robinson & Wilson, Inc. v. Stone, 35 Cal. App. 3d 396 (1973).

Agreement supported by adequate consideration

Lastly, is the agreement supported by adequate consideration? Adequate consideration is defined as “any benefit conferred, or agreed to be conferred, on the promisor by any other person to which the promisor is not lawfully entitled, or any prejudice suffered or agreed to be suffered by such person, other than such as he or she is at the time of consent lawfully bound to suffer, as an inducement to the promisor.” Cal. Civ. Code § 1605. Generally, “the consideration for a promise must be an act or a return promise, bargained for and given in exchange for the promise.” In re Insurance Installment Fee Cases, 211 Cal.App.4th 1395, 1415 (2012). Thus, a contract is supported by a sufficient consideration if there is some benefit to the promisor or detriment to the promisee, regardless of the amount of the benefit or detriment; however, there are a few circumstances which do not constitute adequate consideration, such as the performance of a legal obligation or past consideration for a future obligation. See id.; Harris v. Time, Inc., 191 Cal.App.3d 449 (1987); Faigin v. Signature Group Holdings, Inc., 211 Cal.App.4th 726 (2012).

Bringing these three elements of a valid oral contract together, if you feel confident that you can show mutual assent to the agreement, the terms of the agreement, and adequate consideration, then you may enforce your contractual rights even if the agreement was never reduced to writing. In our scenario with the back-stabbing writer, these three elements are satisfied.

When your Contract must be in writing

There are some exceptions to be aware of. California law states that contracts may be oral unless “required by statute to be in writing.” Cal. Civ. Code § 1622.  Under the Code of Civil Procedure, there are eight types of contracts that must be signed and in writing. Cal. Civ. Code § 1624. These contracts include:

  1. an agreement that by its terms is not to be performed within one year from its making;
  2. a promise to answer for the debt, default, or miscarriage of another;
  3. an agreement for a lease with a term greater than one year (see Cal. Civ. Code § 1971);
  4. an agreement for the sale of an interest in real property (see Cal. Civ. Code § 1971);
  5. a commission or compensation agreement with a real estate agent or broker to purchase or sell real estate, or to lease real property for more than one year, or to find a buyer, seller, lessee, or lessor;
  6. an agreement which by its terms is not to be performed during the lifetime of the promisor;
  7. an agreement by a purchaser of real property to pay a debt secured by a mortgage or trust deed, unless assumption of the debt is specifically provided for in the conveyance of the property; and
  8. a professional lender's contract, promise, or commitment to loan or credit money exceeding $100,000, not primarily for personal, family, or household purposes. Cal. Civ. Code § 1624.

If your contract does not fall into one of these eight categories, you should be able to enforce an oral contract so long as it meets the previously discussed elements.

In Practice

Let’s revisit our example. If the agreement with your writer friend is determined to be a two-year long agreement, that would make it “(1) an agreement that is not to be performed within one year from its making.” As such, it would have to be put into writing to be enforceable.

Lastly, if you think that you have an oral contract that has been breached, just as a breach of a written contract, it is important that you do not sit on your rights. The statute of limitations for a breach of an oral contract in California is two years. Cal. Civ. Code § 339(1); Gardner v. Basich Bros. Const. Co., 44 Cal.2d 191, 194 (1955); Church v. Public Util. Com. of Calif., 51 Cal. 2d 399, 401 (1958). Thus, it is crucial that you act quickly as soon as you become aware of a potential breach so that you do not lose the chance to enforce your oral agreement.

Originally posted: June 22, 2020
Last updated: August 30, 2021

Pfeiffer Law Corp is a law firm with an emphasis on entertainment and business litigation.

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